While Amazon (NASDAQ: AMZN) has been regarded as a highly successful online retailer, the company has also been encroaching into a number of other areas.
One of those is in the logistics space, with major companies now recognizing Amazon as a major competitor in and of itself. FedEx (NYSE: FDX) announced recently that they would not be working with Amazon anymore, focusing instead on doing business with other retailers.
While Amazon only accounts for 1.3 percent of the companies sales, it is a significant move that not only shows the extent to which Amazon has become a serious competitor in this area, but also a sign that FedEx believes isn’t reliant on Amazon’s growing popularity to thrive on its own.
“FedEx has made the strategic decision to not renew the FedEx Express U.S. domestic contract with [Amazon] as we focus on serving the broader e-commerce market,” FedEx said in a statement. Analysts reacted with surprise in regards to the announcement, with Citigroup analyst Christian Wetherbee making his own comments on the matter back on Friday. “This is a fairly bold pronouncement from FedEx. Given the competitive creep that’s been occurring over the last several years, and FedEx’s limited exposure, we believe that this is a positive strategic decision for the company.”
Amazon has been making several moves into the logistics industry over the past years. For one, the company launched a program which would fund start-up delivery businesses operating vans that take packages from Amazon centers to homes, directly competing with service providers like FedEx and the UPS.
An earlier announcement from Amazon to start its own truck brokerage platform to help connect independent truck owners with volume from Amazon also saw third-party logistics providers suffer.
In response to the news, shares of FedEx rose around 0.7 percent on Friday, while Amazon’s stock shot up 2.8 percent in a much larger move. Overall, the move from FedEx is more of a sign that Amazon truly is one the rise, and that the company’s stock may very well reach the $3,000 price range in the future as so many analysts are now predicting.
FedEx Company Profile
FedEx pioneered overnight delivery in 1973 and remains the world’s largest express delivery firm. In fiscal 2018, FedEx derived about 55% of its $65 billion top line from its express division, 28% of sales from Ground, and 10% from its Freight less-than-truckload trucking segment.
FedEx Office provides document production and shipping services, and Trade Networks offers freight forwarding. FedEx acquired the Dutch parcel delivery firm, TNT Express, in 2016. – Warrior Trading News
Amazon Company Profile
Amazon is among the world’s highest-grossing online retailers, with $233 billion in net sales and $408 billion in estimated global gross merchandise volume (GMV) in 2018.
Online product and digital media content sales accounted for 53% of net revenue in 2018, followed by commissions, related fulfillment and shipping fees, and other third-party seller services (18%), Amazon Web Services’ cloud compute, storage, database, and other offerings (11%), Prime membership fees and other subscription-based services (6%), product sales at Whole Foods and other physical store retail formats (7%), and advertising services and cobranded credit cards (4%). International segments constituted 32% of Amazon’s non-AWS sales in 2018, led by Germany, the United Kingdom, and Japan. – Warrior Trading News